Guaranteed lifetime income is increasingly important for retirees in a post-pension world. But the primary vehicle for guaranteed benefits—annuities—can be a hard sell for many investors. It seems that every other day an article panning annuities is published in the mainstream media; and regardless of whether these attacks are unwarranted or uninformed, they have a real effect on those who need the protection of lifetime income the most.

Enter Stand-Alone Living Benefits (SALB).

Stand-Alone Living Benefits Basics

SALB offer a guaranteed stream of income without purchasing a traditional annuity. The product acts like an insurance policy on an investment account, with income benefits kicking in if the account is depleted during the insured’s lifetime. The product is sometimes referred to as a “hybrid annuity” product, although it is not an annuity in the traditional sense.

Here is how they work. The investor places assets in an investment account that is eligible for coverage by SALB. The SALB provide a 4 to 8 percent lifetime income guarantee, calculated over the Retirement Income Base—essentially the account value—in place when the SALB are purchased. The lifetime income guarantee will then continue payments to the insured if the account is depleted to $0 and can no longer support the payments guaranteed under the contract. Benefits typically are not available until the insured reaches sixty-five. Fees associated with SALB range from 75 to almost 200 basis points, in addition to advisory fees associated with the underlying account.

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